Libor to Oil Targeted by EU Deal on Tougher Market-Abuse Law

By Jim Brunsden -
Jun 26, 2013

Bankers and traders found guilty of
rigging benchmark rates from Libor to oil would face tougher
fines and other sanctions in the future under a deal reached by
the European Union to overhaul its penalties for market abuse.

Nations clinched a draft accord with European Parliament
lawmakers to toughen sanctions against market abuse. The accord
sets out minimum penalties available to regulators when they
punish perpetrators. As well as rate rigging, the draft law
covers other kinds of market manipulation and insider trading.

“On top of manipulation of Libor we are witnessing more
alleged and potential manipulation of benchmarks in energy
markets such as oil and gas, while investigations have begun
into whether traders at some of the world’s biggest banks have
manipulated foreign exchange rates,” Arlene McCarthy, the
parliament’s lead lawmaker on the proposals, said in an e-mailed
statement on the deal. The law ‘‘provides for tough minimum
sanctions and a permanent ban from working in the industry.”

Global regulators have fined UBS AG (UBSN), Barclays Plc (BARC) and Royal
Bank of Scotland Group Plc about $2.5 billion in the past year
for distorting Libor and similar benchmarks. At least a dozen
firms remain under investigation around the world. Probes into
potential rigging have expanded beyond interbank lending rates
such as Libor to include markets ranging from oil prices to
foreign exchange.

Michel Barnier, the EU’s financial services commissioner,
said the new rules would respond “recent scandals on interest
rate, commodity and currency benchmarks.”

He said investors will “be reassured that manipulation of
benchmarks is prohibited and subject to strict sanctions.”

Financial Stability Board Chairman Mark Carney, the next
Bank of England governor, said this week that global regulators
will set up a task force with banks in a bid to repair or
replace tarnished benchmarks in the wake of the rate-rigging
scandals.

Legislators and national officials had to overcome splits
on topics including the maximum fines available to regulators,
with legislators pushing for stronger sanctions than those
proposed by national governments.